Question

XYZ Electronics Pvt. Ltd. is a Mumbai-based electronic gadget company. They just received an order for 1000 units of their latest smart phone model from a dealer in another state. The selling price per unit is INR 15,000, with a 12% GST rate. XYZ Electronics Pvt. Ltd. is interested in learning about the GST consequences of this interstate sale. Can you answer the following questions for them?

What type of supply does this transaction fall under and how will it be treated under
GST?

Answer 1

The sale of smartphones from XYZ Electronics Pvt. Ltd. to the dealer in another state is an interstate supply, subject to IGST at 12%. The GST amount on the order of 1000 units priced at INR 15,000 each is INR 1,800,000, making the total invoice value INR 16,800,000.

Step-by-step explanation:

The transaction mentioned falls under the category of an interstate supply, because the goods, in this case, smartphones, are being sold from one state to another within India. In the context of the Goods and Services Tax (GST), interstate supplies of goods and services are subject to the Integrated Goods and Services Tax (IGST).

Since XYZ Electronics Pvt. Ltd. is based in Mumbai and the dealer is located in another state, they will have to charge IGST on the selling price of the smartphones. The IGST rate is mentioned as 12%, which should be applied to the selling price of each unit. Here is how the GST amount is calculated:

1. Calculate the total selling price: 1000 units × INR 15,000 per unit = INR 15,000,000.
2. Calculate the IGST: 12% of INR 15,000,000 = INR 1,800,000.
3. Add the IGST to the total selling price to determine the invoice value: INR 15,000,000 + INR 1,800,000 = INR 16,800,000.

The invoice value that the dealer will have to pay is INR 16,800,000, which includes the cost of the phones plus the IGST.